President Uses Dubious Statistics on Costs of Malpractice Lawsuits
January 29, 2004
Two Congressional agencies dispute findings that caps on damage awards produce big savings in medical costs.
The President holds out the prospect of major cost savings if Congress will pass a law limiting what injured patients can collect in lawsuits. He wants a cap of $250,000 on any damages for “pain and suffering” and other non-economic damages. His administration projects savings to the entire economy of between $60 billion and $108 billion per year in health-care costs, including $28 billion or more to federal taxpayers.
But both the General Accounting Office and the Congressional Budget Office criticize the 1996 study the Bush administration uses as their main support. These nonpartisan agencies suggest savings – if any – would be relatively small.
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Those claims rest mainly on a single 1996 study by two Stanford economists who said caps on damage awards could hold down overall medical costs by 5% to 9%. They studied heart patients who were hospitalized, compared costs in states with and without limits on malpractice lawsuits, and then projected their findings to the entire health-care system.
But both the GAO and the CBO now question their sweeping conclusion. When the CBO attempted to duplicate the Stanford economists’ methods for other types of ailments they found found “no evidence that restrictions on tort liability reduce medical spending.”
“In short, the evidence available to date does not make a strong case that restricting malpractice liability would have a significant effect, either positive or negative, on economic efficiency, ” the CBO said.
What the President Said
What HHS Said
The President was relying on a paper issued last year by an assistant secretary of HHS which said “The litigation and malpractice insurance problem raids the wallet of every American.”
The HHS report put the cost of malpractice insurance to doctors alone at $6.3 billion in 2002, but said much larger costs come from "defensive medicine":
That “leading study” was a 1996 paper by Stanford economists Daniel P. Kessler and
The Kessler-McClellan study is one of the few academic studies that has ever attempted to measure the cost of “defensive medicine” attributable to lawsuits. It did so by examining the cost of treating hospitalized heart patients in states that have caps on damage awards and other restrictions on malpractice suits, and comparing them with the costs of treating similar patients in states without such limits on lawsuits.
The Kessler-McClellan conclusion:
The Kessler-McClellan study won the 1997 American Economics Association’s award in health economics.
However, a fact not mentioned in the Bush HHS paper is that several other studies of defensive medicine failed to find anywhere near such large costs. A 1990 study by the Harvard University School of Public Health “did not find a strong relationship between the threat of litigation and medical costs,” CBO said. And a 1999 study in the Journal of Health Economics found only tiny savings – less than three-tenths of one percent – when studying the cost of Caesarian sections in states with limits on lawsuits, compared to states without limits.
Finally, a 1994 study by the congressional Office of Technology Assessment found some added costs (under $54 million total) due to defensive radiology in children with head injuries and defensive Caesarian sections in certain women with difficult pregnancies. But the OTA study concluded: “it is impossible in the final analysis to draw any conclusions about the overall extent or cost of defensive medicine.”
What GAO and CBO Said
CBO and GAO both question whether the results Kessler and McClellan observed in hospitalized heart patients can be applied to patients in cancer wards, nursing homes, doctors’ offices, maternity wards and elsewhere.
In 1999 a GAO study said the evidence Kessler and McClellan cited was too narrow to provide a basis for estimating overall costs of defensive medicine:
Worth noting: The nonpartisan CBO is now headed by Douglas Holtz-Eakin, who previously was chief economist for President Bush's Council of Economic Advisers.
President George W. Bush, " President Bush Calls for Medical Liability Reform : Remarks by the President on
Daniel Kessler and
Perry Beider and Stuart Hagen “ Limiting Tort Liability for Medical Malpractice ” Congressional Budget Office
US General Accounting Office “ Medical Malpractice : Effect of Varying Laws in the
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